In comparison, the stock market’s tepid week looks pk. No, the bulls couldn’t muster the herculean effort necessary to lift both major indexes higher this week, but that doesn’t mean much damage was done, either. The S&P 500 rose 0.6% to 1,842.37 this week but still finds itself down 0.3% so far this year. The Dow Jones Industrial Average, meanwhile, dipped 0.2% to 16,437.05 this week but is off 0.8% in 2014.

The big news this week was today’s payrolls number, which showed the U.S. adding just 74,000 jobs in December, well below the 200,000 economists had predicted. Sure, the unemployment rate fell to 6.7%–economists had forecast it come in at 7%–but that was due almost entirely to people leaving the workforce. The Fed’s James Bullard chalked that up to demographics rather than economic weakness, but it’s still got the bulls out there worried that another growth scare could be on its way.

Deutsche Bank’s Alan Ruskin calls it “one of the most confusing unemployment reports in quite a while.” He writes:

The data will make both policymakers and the market take a pause for thought….it is extremely doubtful that the 87K private payrolls number is anywhere close to representing the underlying growth picture, while the 6.7% has again been achieved in the main by a slide in the participation rate and probably overstates strength. Nonetheless, in coming months, it is the faster unemployment rate downward trend that is likely to be sustained, much more than weak payroll growth.

Don’t expect last month’s payrolls to cause the Fed to slow the pace of its taper, say Capital Economics’ Paul Ashworth and Jessica Hinds. They write:

The weakness of payrolls will inevitably lead to speculation that the Fed will leave its asset purchases unchanged at $75bn per month at the upcoming meeting in late January. However, we still think the Fed will push through a further $10bn reduction.

The central bank is likely to downplay the weakness in payrolls in December given the weather. What’s more, following a drop of 0.3pp to 6.7%, the unemployment rate is closing in on the 6.5% threshold that was originally intended to signal that the Fed would at least begin to consider raising the fed funds rate.

The folks at MRB Partners believe the Fed will do what it has to do if stocks start to crumble. They write:

The good news is that the relief valve of lower bond yields and a retreat by the Fed is still likely to operate if equity prices were to start correcting strongly. The Fed is still sensitive to market signals; witness the retreat on tapering last September. Thus, equity setbacks should prove temporary and timing them accurately will remain a challenge.

InvesTech Research’s Jim Stack notes that investors should be nervous entering the fifth year of this bull market. He explains:

Over the past 82 years there have been 15 bull markets…the average duration or life span of these previous bull markets has been 3.8 years, and the vast majority of bull markets have ended between 2-5 years. So not only is the current bull market a full year longer than the norm, it is about to become the fourth longest bull market since 1932. If that doesn’t make you nervous, it should.

Add a Comment

We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comment

There are 10 comments

JANUARY 10, 2014 6:31 P.M.

randy wrote:

Let the markets be the markets and keep the manipulaton out of it. Markets donthave to go up or down but Wall Street is always happier if they go down, They cant make a mistake then!!

JANUARY 10, 2014 6:34 P.M.

Thomas Kopf wrote:

STZ has a Kickback scheme just like Jones Soda in 4Q 2006! STZ bought a business with historical Operating Margin of 16% STZ closes the Modello Purchase and now the Operating Margin is 32% The Deal included a three year non renewable supply agreement to supply STZ with Beer. Obviously below cost of Modello -Bud Inbev to produce! It's a Kickback Scheme ...Buy the asset at a Inflated price of 5.3 Billion and get 800 million kickback thru a supply agreement over three years at below market rates! It's quit Obvious ...But The Speculation Fraud Market is Back! As much as Wall St is Different it's always the same! Best Tom Kopf

JANUARY 10, 2014 6:36 P.M.

Mike wrote:

The Legend of Hercules has now 1 positive review.

JANUARY 10, 2014 11:48 P.M.

jorod wrote:

The market has almost tripled in 5 years. What's to worry?

JANUARY 11, 2014 3:41 A.M.

tbwinson wrote:

Is the author getting paid some how to shill for Hollywood or trying to drive traffic to the websites he's linking to? I think this is the third column I've seen in which a recent movie release was mentoned.

JANUARY 11, 2014 1:48 P.M.

Anonymous wrote:

Looks like gold was the WINNER despite all the gloom and doo for metals gurus. The market is in trouble but these morons would never say so.

JANUARY 11, 2014 2:26 P.M.

Ed wrote:

Classic successful investing/speculating advice is to buy low and sell high. Who's crazy, or inexperienced, enough to buy this market?

JANUARY 11, 2014 4:37 P.M.

Ramesh wrote:

Not sure why the author started the article with Hercules reference. I understand the need to be topical to grab reader's attention, but the segway from a movie to market made no sense.

JANUARY 11, 2014 6:44 P.M.

Nick Thompson wrote:

LinkedIn founder Reid Hoffman and his buddies in Silicon Valley are the face of the new rich white slave owners in the USA. They refuse to hire American worker instead opting for more illegal aliens and outsourcing.

JANUARY 11, 2014 8:12 P.M.

GogglesPisano wrote:

So what is one best to do it they've just runned into a bunch of new money, hold it in cash until the market dumps?

About Stocks To Watch

Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.